Budget Shadowed by Geopolitics, Economists Urge Budget Reallocation

Several economists met with former Vice President Jusuf Kalla to discuss the economic impacts of the United States-Iran conflict. Vid Adrison, an economist at the Institute for Economic and Social Research (LPEM) at the Faculty of Economics and Business, University of Indonesia, explained that one of the key concerns raised during the discussion was the increasingly constrained fiscal space.

Vid stated that the Middle East conflict could affect Indonesia through two channels: rising energy prices that could trigger inflation, and economic slowdown that could reduce exports. The government, he said, must respond to these challenges through budget reallocation towards more productive expenditure.

“One option that could be considered is to reconsider the free nutritious meal programme (MBG),” Vid said following the meeting at Kalla’s residence in South Jakarta on 8 March 2026. He noted that MBG requires an extraordinarily large budget, approximately 8 per cent of the state revenue and expenditure budget (APBN).

However, based on data from the National Socioeconomic Survey (Susenas), only 15 per cent of the population expressed concern about having insufficient food. This means, Vid argued, the government could save money by focusing the MBG programme on the 15 per cent of the population that genuinely needs it.

Yose Rizal Damuri, Executive Director of the Centre for Strategic and International Studies, added that the government must also ensure adequate fuel supply. Therefore, he said, the government needs to diversify fuel oil supply as quickly as possible.

Yose also urged the government to provide accurate information to the public. “Additionally, it is important to provide accurate and regular information to the public to calm the concerns that are currently emerging in society,” he said.

Meanwhile, Jusuf Kalla stated that the current economic situation is influenced by global conditions, past policies, and current policies. However, what can be intervened is current policy. He believes that when the state budget faces a large deficit, the solution is to choose financing that can advance the country and increase revenues.

According to Jusuf Kalla, the government must prioritise programmes that can drive economic growth. “Free nutritious meals (MBG) are important, military equipment purchases are important, cooperatives are important. But there are more important things,” he said.

Previously, Finance Minister Purbaya Yudhi Sadewa stated that the government would take cost-saving measures to prevent the fiscal deficit from exceeding 3 per cent of Gross Domestic Product (GDP) amid the current geopolitical situation. According to Purbaya, the state budget deficit could reach 3.6 per cent if world crude oil prices reach US$92 per barrel.

The state treasurer indicated that this scenario would only occur if the government did not intervene. Therefore, the government is considering spending cuts in several budget categories, one of which is the free nutritious meal programme. “If that is the case, we will take steps to prevent it from happening. Where can we cut spending? For example, in the MBG programme,” Purbaya said at his office on Friday, 6 March 2026.